U.S. Economy Defies Slowdown, Growing 4.4% as Consumers Keep Spending Strong
The U.S. economy expanded at a robust 4.4% annual rate in the third quarter of 2025, according to an updated government estimate, underscoring how little momentum has faded despite higher tariffs and stubborn inflation. The revision nudged growth up from the initial 4.3% reading and marked the fastest quarterly expansion in two years, well above the economy’s estimated long-term speed limit of about 1.8%.
Fifth Straight Year of Above-Average Growth in Sight
With growth now likely to exceed 2% again in 2025, the U.S. appears on track for a fifth consecutive year of above-average economic performance. Even before fourth-quarter data arrives, the strength seen through summer and early fall has reinforced confidence that the economy remains on solid footing.
Consumer Spending Does the Heavy Lifting
Consumer spending; which accounts for roughly 70% of U.S. economic activity; rose at a revised 3.5% pace from July through September. Americans spent more on services such as healthcare, travel, and experiences, while goods spending grew more modestly, reflecting a shift toward service-driven consumption.
Higher-Income Households Lead the Charge
Recent data show spending strength has been concentrated among higher-income consumers, whose finances have been buoyed by market gains and investment income. The Federal Reserve’s Beige Book noted stronger demand for luxury goods, travel, and experiential spending, reinforcing concerns that economic gains are unevenly distributed.
Business Investment Jumps on AI Optimism
Businesses also contributed to growth, increasing investment in equipment and software at a solid pace. Much of that spending has been tied to artificial intelligence and other advanced technologies, signaling continued corporate confidence despite uncertainty surrounding trade policy.
Trade Trends Give GDP an Extra Boost
A surge in exports combined with a decline in imports added to third-quarter growth. Some of that activity reflected “front-running,” as businesses and consumers accelerated purchases to get ahead of higher tariffs, temporarily inflating GDP. Even so, economists say underlying demand remained strong.
Corporate Profits Rebound Sharply
After two quarters of weak or negative results, corporate profits surged in the third quarter. Adjusted earnings before taxes jumped 4.5% from July to September, offering companies more financial flexibility to invest, hire selectively, or return capital to shareholders.
Shutdown Distorts Inflation Data
The 43-day government shutdown in October and November complicated inflation tracking, limiting the data available for CPI and import price reports. As a result, the Bureau of Economic Analysis had to estimate some price measures, injecting uncertainty into inflation readings for the fall months.
Inflation Still Above the Fed’s Comfort Zone
The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures price index, rose 2.8% year over year in November. Core inflation; excluding food and energy; also climbed 2.8%, with December estimates suggesting inflation may have picked up further, reinforcing expectations that the Fed will keep interest rates unchanged for now.
A “Jobless Boom” Raises Questions About 2026
Despite strong growth, job creation has slowed sharply, averaging just 28,000 new jobs per month since March. Economists describe the situation as a “jobless boom,” where growth is powered by consumption and AI investment rather than broad hiring. While unemployment remains low at 4.4%, many middle-class households say they are not yet feeling the benefits of the expansion.
What It Means for the Months Ahead
The strong third-quarter performance suggests the U.S. economy entered the final stretch of the year with considerable momentum, supported by resilient consumers, rising corporate profits, and sustained business investment. Still, economists caution that uneven spending, softer hiring, and lingering inflation pressures could shape a more complicated outlook in 2026, leaving the key question whether broader segments of the economy will begin to feel the benefits of the expansion.
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2026 State Tax Shake-Up: See How Your Income, Property, and Sales Taxes Will Change
As the calendar flips to 2026, taxpayers across the country will feel the impact of sweeping state tax changes. From income tax cuts and flat-tax expansions to corporate reforms, sales tax overhauls, and property tax relief, 43 states are implementing notable tax changes, most taking effect January 1, 2026. Together, they reveal a clear trend: states are competing harder than ever to attract workers, families, retirees, and businesses. Below are some of the significant changes.
2026 State Tax Shake-Up: See How Your Income, Property, and Sales Taxes Will Change
Major Student Loan Changes Coming in 2026; From Parent PLUS Caps to the End of SAVE
Federal student loans are about to change in some of the biggest ways in decades. Beginning in 2026, new laws will reshape how much students and parents can borrow, eliminate long-standing loan programs, and overhaul repayment for future borrowers. For families planning for college, graduate students weighing advanced degrees, and borrowers already navigating repayment, these shifts could significantly alter education and financial decisions.
Major Student Loan Changes Coming in 2026; From Parent PLUS Caps to the End of SAVE
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John Dealbreuin came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
He started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. John resides in the San Francisco Bay Area enjoying nature trails and weight training.
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Personal Capital: This is a free tool John uses to track his net worth on a regular basis and as a retirement planner. It also alerts him wrt hidden fees and has a budget tracker included.
Platforms like Yieldstreet provide investment options in art, legal, real estate, structured notes, venture capital, etc. They also have fixed-income portfolios spread across multiple asset classes with a single investment with low minimums of $10,000.
